# Joint Practice Recognizing Freelance or Commercial Income Source: https://www.mtrlegal.com/en/partnership-practice-recognizing-independent-or-commercial-income/ · Language: en · Updated: 2026-07-27 --- ## Group Practice – Freelance or Commercial Income? ### BFH Judgment of February 4, 2025 (Ref. VIII R 4/22): Organization can still be "freelance" In group practices, it is not uncommon for individual partners to predominantly take on management, organizational, or administrative tasks. This quickly raises the concern from a tax perspective that the practice could be classified as commercial – resulting in a commercial tax liability ("co-adventuring" for partnerships). The Federal Finance Court (BFH) clarified with the judgment of **February 4, 2025** (Ref. **VIII R 4/22**): **Even a practice partner who is primarily active in organizational roles can be a co-entrepreneur of a freelance partnership – and the practice's income can remain entirely freelance.** --- ## 1. Background: Freelance Activity and Commercial Tax Doctors and dentists generally earn **income from self-employment** according to **§ 18 Abs. 1 Nr. 1 EStG**. This is **not** subject to commercial tax. It becomes problematic for **partnerships** (e.g., GbR, partnership companies) when the tax authorities believe that **not all co-entrepreneurs** fulfil the characteristics of a freelance activity or the company also engages in commercial activities. In such scenarios, depending on the situation, there is a risk of **commercial structuring/co-adventuring** and thus a commercial tax liability. Especially in larger practices, internal division of labor is common: While some partners primarily provide treatment, others secure processes, staff, quality, contracts, and communications with authorities. --- ## 2. The Case: Senior Partner with Focus on Organization Instead of "Chairside Treatment" The decided case concerned a **partnership of dentists**. According to the partnership agreement, a senior partner was mainly responsible for the **commercial management and organization** entrusted with the operation of the practice, among others: - Personnel matters - Process and practice organization - Quality assurance - Handling of contractual or administrative law topics - Representation to authorities The **traditional patient treatment** receded significantly. In the year in dispute, he conducted only **five consultative consultations** outside the practice rooms; a typical dental treatment on the treatment chair did not take place. His contribution to turnover was approximately **900 Euros.**. --- ## 3. View of the Tax Office and Financial Court: “Then it is commercial” The **Tax Office** and in the lower court also the **Financial Court of Rhineland-Palatinate** held the view that the senior partner was no longer professionally self-employed due to his predominantly administrative activities. Consequence of this view: **The income of the entire practice** was **commercial** - with corresponding tax implications. --- ## 4. Decision of the BFH: Professional status despite administrative focus The BFH overturned this view and decided in favor of the practice: The partnership generated **income from self-employed work** and **no** income from commercial business. ### Core statements of the BFH - For professional status, it is **not alone** it depends on whether a partner regularly treats patients. - What is decisive is whether their activity is in a**personal, material, and functional connection** with the practiced liberal profession. - Organizational/administrative activities can also be part of the freelance partnership,**if** they are clearly integrated into the professional service delivery and ensure or secure it in the market. - There are**no rigid minimum extents** of classical treatment activities that must be necessarily exceeded. The BFH assessed the commercial and organizational management as a substantial contribution to ensuring that the dental services of the practice can be properly offered in the market. Thus, there is no "breach" with the professional image. --- ## 5. Legal Framework: § 18 EStG and Requirements for Partners According to**§ 18 Section 1 No. 1 EStG** belonging to a catalog profession (e.g. dentist) alone is not automatically sufficient. In partnerships, it must rather be**positively established for each partner** that they fulfill the**characteristics of the liberal profession** – especially the**own active development of professional qualification.**. However, the BFH clarifies: This active development can - depending on practice reality - also consist of a**leading, contributing, organizational activity** provided that it is: - technically and functionally oriented towards the professional services and - does not merely represent "non-practice related" commercial business activities. --- ## 6. Importance for Practice: More Flexibility, Lower Risk The judgment is relevant for many group practices because it strengthens the**division of labor organization:** A partner can predominantly take over management tasks without automatically triggering trade tax liability for the entire partnership as a result. However, it remains important: Whether income is freelance or commercial is always a **case-by-case decision**. Particularly mixed cases (e.g., additional commercial activities, involvement of external third parties, structural and contract design) should be carefully examined. --- ## 7. Note on Classification / Disclaimer (Abuse Warning) This post serves **general informational purposes** and does not replace individual tax or legal advice in specific cases. A final assessment depends on the concrete corporate contractual design, the actual distribution of tasks, as well as other circumstances. --- If you want, I can also adapt the article: - into an **SEO-optimized** online post (Meta Title/Description, subheadings, FAQs), or - include a **neutral template section** "What does this mean for our practice?" without promotional wording and without risky assurances.